Australian Energy Market Operator

AEMO operates Australia's National Electricity Market (NEM), the interconnected power system in Australia’s eastern and south-eastern seaboard, and the Wholesale Electricity Market (WEM) and power system in Western Australia.

AEMO operates gas retail markets in New South Wales and the Australian Capital Territory, Queensland, South Australia, Victoria, and Western Australia. AEMO also operates wholesale gas markets in south-eastern Australia, those being the Declared Wholesale Gas Market in Victoria (DWGM), the Short Term Trading Market in Adelaide, Brisbane and Sydney (STTM), and the Gas Supply Hub (GSH), whose trading locations are based at Wallumbilla in Queensland, and Moomba in South Australia. AEMO also operates the Natural Gas Services Bulletin Board (GBB), and is system operator of the Victorian Gas Declared Transmission System. AEMO is also responsible for Gas Services Information functions in Western Australia.

Maximum Credit Limit

The National Electricity Rules Clause 3.3.8 requires AEMO to publish the Credit Limit Procedures for the determination of prudential settings for market participants in the National Electricity Market (NEM).

In accordance with the Prudential Standard and Framework which took effect on 1 November 2012, version 4.0 of the Credit Limit Procedures has been effective from 1 May 2018.

Credit limit procedures

Modelling Parameter and MNSP Prudential Requirement Changes

AEMO has amended key modelling parameters in the CLP to better reflect short to medium term market conditions. These amendments are:

Changing the weighting factor for average regional price (WP,R) from 10% to 20%.

Changing the weighting factor for volatility factors (WVF,R) from 10% to 20%.

Changing the capping factor (for price and volatility factors) from +/-10% to +/-20%.

Additionally, clause 10.3 of the CLP was amended to allow MNSPs to use reallocations, giving MNSPs greater flexibility in meeting their prudential requirements.

The changes are effective from 1 May 2018.

Prudential Margin Offsets

On 22 September 2016, the Australian Energy Market Commission (AEMC) made the National Electricity Amendment (Application of Offsets in the Prudential Margin Calculation) Rule 2016 (PM Offsets Rule).

With effect from 20 October 2017, the PM Offsets Rule gives AEMO the ability to offset trading amounts against reallocation amounts when determining a Market Participant’s prudential margin (PM), as part of its prudential settings in the National Electricity Market (NEM). This would allow the PM for a Market Participant to be reduced if:

The Market Participant has negative aggregate trading amounts (i.e. net load) and positive aggregate reallocation amounts (i.e. net credit reallocations). The PM would be based on the load offset by the net credit reallocations.

The Market Participant has negative aggregate reallocation amounts (i.e. net debit reallocations) and positive aggregate trading amounts (i.e. net generation). The PM would be based on the debit reallocations offset by the net generation.

Market Participants can use the ‘Prudential Margin Offset’ menu item, under the Settlements menu item on the AEMO Markets Portal, to opt in/opt out of PM Offsets.

Credit limit procedures effectiveness reports

National Electricity Rules clause 3.3.8(f) requires AEMO to publish a report on the effectiveness of the Credit Limit Procedures developed under the prudential standard framework, at least once a year.